Council tax – Liability – Local Government Finance Act 1988 – Respondent letting residential properties on assured shorthold tenancies for fixed term of six or 12 months then continuing from month to month – Whether respondent or tenant liable for council tax where properties unoccupied – Appellant council arguing such tenancy of the type granted incapable of existing in law as single property interest – Whether giving rise to two separate tenancies such that respondent liable for council tax once fixed term expiring – Appeal dismissed
The respondent appealed to the Valuation Tribunal for England (VTE) against decisions of the appellant council holding him liable to pay council tax on various residential properties which he let on assured shorthold tenancies, but which were currently unoccupied by the tenants.
The central issue was whether the respondent or the tenant was the “owner” of the relevant dwelling, within the meaning of section 6 of the Local Government Finance Act 1992, in circumstances where the dwelling had no resident for the period in dispute. That in turn depended on whether the tenant had a “material interest”, namely a “leasehold interest which was granted for a term of six months or more”, within section 6(5) and (6) of the 1992 Act.
The respondent contended that the relevant tenancies fell within that description so that the tenant was liable for council tax. Under the terms of the tenancy agreement, each of the properties was let for a term of either six or 12 months, continuing thereafter on a monthly basis unless terminated by notice. The tenancy agreement stated that it was intended to create an assured shorthold tenancy under the provisions of the Housing Act 1988.
The appellants argued that the term created by the tenancy agreement could not exist in law as a single property interest. They contended that a “’continuation tenancy”, consisting of both a fixed and periodic term, was not a “term of years absolute”, as required by section 1(1) of the Law of Property Act 1925 and defined in section 205 of that Act, and was therefore void for uncertainty. They submitted that the tenancy agreement therefore created two separate tenancies, a fixed term followed by a separate monthly periodic tenancy. Since the periodic tenancy was not for a term of six months or more, they argued that the respondent became the “owner” of the property once the fixed term expired and the periodic tenancy commenced.
Alternatively, they contended that the grant of a continuation tenancy was saved by the 1988 Act, under which the fixed term granted by the tenancy agreement was followed by a statutory tenancy under section 5(2) of the 1988 Act, which was not a tenancy for six months or more.
The VTE ruled in favour of the respondent and its decision was upheld by the High Court: see [2016] EWHC 1839 (Admin); [2016] PLSCS 218. The appellants appealed.
Held: The appeal was dismissed.
(1) There was no doubt that a lease for a fixed term was valid, as was a periodic tenancy. There was no reason why an amalgam of the two could not be granted. Such leases were well known to the common law and no doubt as to their validity had ever been raised. The grant of the fixed term and the ensuing periodic term were seen as a single grant at common law: Doe d Chadborn v Green (1839) 9 Ad & El 658, R v Inhabitants of Chawton (1841) 1 QB 247 and Brown v Trumper (1858) 26 Beav 11 applied.
(2) The Law of Property Act 1925 did not change that position. A term for a fixed period of months, and then from month to month, fell clearly within the genus of the statutory descriptions in section 205(1)(xxvii), either because it was expressly covered by the statutory wording itself or because that section envisaged the possibility of creating terms of years, including a term for less than a year and a term from year to year. There was no reason why the statute should be taken to have rendered impossible the creation of an amalgam of the two, as had been familiar to the common law for centuries. There was obvious benefit to both parties to the lease in giving a degree of initial certainty of the term’s duration, with a degree of flexibility thereafter: Prudential Assurance Co Ltd v London Residuary Body [1992] 2 AC 386 and Mexfield Housing Co-operative Ltd v Berrisford [2011] UKSC 52; [2011] 3 EGLR 115 considered.
(3) On its natural construction, the tenancy agreement used by the respondent was, in terms, a single grant for six or 12 months certain and then continuing from month to month. It accordingly granted a term of six months or more, which constituted a “material interest” within section 6(6) of the 1992 Act. The tenant held pursuant to that same grant throughout the tenancy, whether during the fixed term or thereafter. The tenant’s liability for council tax therefore continued while those tenancies subsisted as periodic tenancies, even if the tenant had gone out of occupation.
(4) Section 5(2) of the Housing Act 1988 did not apply to the tenancies granted by the respondent. The tenancy was not for a “fixed term” alone, to which section 5(2) would apply at the end of the fixed element of the term. Instead, the term granted by the tenancy agreement continued after the end of the fixed term until terminated in the usual way. There was no need for the application of section 5(2) since the contract did the necessary work. The 1988 Act was intended to provide protection for tenants in circumstances where the tenant could no longer rely on his contract. While the contractual rights subsisted, the statutory protection was not required and the tenancy was not a “statutory tenancy”.
Kerry Bretherton QC and Justin Crossley (instructed by the legal department of Leeds City Council) appeared for the appellants; the respondent appeared in person; Justin Bates (instructed by Anthony Gold Solicitors) appeared for the intervener, the Residential Landlords’ Association, by written submissions.
Sally Dobson, barrister
Click here to read a transcript of Leeds City Council v Broadley
